SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2011

SEGMENT INFORMATION

SEGMENT INFORMATION

NOTE 4 – SEGMENT INFORMATION

The Company's primary business is the design and manufacture of arc welding and cutting products, manufacturing a broad line of arc welding equipment, consumable welding products and other welding and cutting products. The Company also has a leading global position in the brazing and soldering alloys market. The Company has aligned its business units into five operating segments to enhance the utilization of the Company's worldwide resources and global end user and sourcing initiatives. The operating segments consist of North America Welding, Europe Welding, Asia Pacific Welding, South America Welding and The Harris Products Group. The North America Welding segment includes welding operations in the United States, Canada and Mexico. The Europe Welding segment includes welding operations in Europe, Russia and Africa. The other two welding segments include welding operations in Asia Pacific and South America, respectively. The fifth segment, The Harris Products Group, includes the Company's global cutting, soldering and brazing businesses as well as the retail business in the United States.

Segment performance is measured and resources are allocated based on a number of factors, the primary profit measure being earnings before interest and income taxes ("EBIT"), as adjusted. Segment EBIT is adjusted for special items as determined by management such as the impact of rationalization activities, certain asset impairment charges and gains or losses on disposals of assets. The accounting principles applied at the operating segment level are generally the same as those applied at the consolidated financial statement level with the exception of LIFO. Segment assets include inventories measured on a FIFO basis while consolidated inventories are reported on a LIFO basis. Segment and consolidated income before interest and income taxes are reported on a LIFO basis. At December 31, 2011, 2010 and 2009, approximately 31%, 30% and 31%, respectively, of total inventories were valued using the LIFO method. LIFO is used for certain domestic inventories included in the North America Welding segment. Inter-segment sales are recorded at agreed upon prices that approximate arm's length prices and are eliminated in consolidation. Corporate-level expenses are allocated to the operating segments on a basis that management believes to be reasonable. Certain corporate-level expenses may not be allocated to the operating segments and are reported as Corporate/Eliminations.

Financial information for the reportable segments follows:

	North America Welding		Europe Welding			Asia Pacific Welding			South America Welding		The Harris Products Group			Corporate / Eliminations			Consolidated
For the year ended December 31, 2011
Net sales	$	1,309,499	$	508,692		$	376,276		$	156,684	$	343,458		$	–		$	2,694,609
Inter-segment sales		136,314		17,422			15,614			494		8,496			(178,340	)		–
Total	$	1,445,813	$	526,114		$	391,890		$	157,178	$	351,954		$	(178,340	)	$	2,694,609
EBIT, as adjusted	$	227,924	$	36,171		$	2,629		$	12,895	$	25,151		$	426		$	305,196
Special items charge (gain)		–		392			(110	)		–		–			–			282
EBIT	$	227,924	$	35,779		$	2,739		$	12,895	$	25,151		$	426		$	304,914
Interest income																		3,121
Interest expense																		(6,704	)
Income before income taxes																	$	301,331
Total assets	$	771,315	$	436,327		$	380,282		$	110,781	$	181,916		$	96,155		$	1,976,776
Equity investments in affiliates		–		20,500			–			4,118		–			–			24,618
Capital expenditures		31,826		8,566			21,498			2,314		1,792			(183	)		65,813
Depreciation and amortization		29,237		11,736			14,663			2,033		4,714			(332	)		62,051
For the year ended December 31, 2010
Net sales	$	1,013,193	$	359,925		$	324,092		$	117,419	$	255,543		$	–		$	2,070,172
Inter-segment sales		108,849		13,330			12,546			1,216		6,641			(142,582	)		–
Total	$	1,122,042	$	373,255		$	336,638		$	118,635	$	262,184		$	(142,582	)	$	2,070,172
EBIT, as adjusted	$	162,192	$	17,023		$	1,752		$	7,554	$	12,311		$	(6,675	)	$	194,157
Special items charge (gain)		–		2,486			(3,741	)		3,123		871			–			2,739
EBIT	$	162,192	$	14,537		$	5,493		$	4,431	$	11,440		$	(6,675	)	$	191,418
Interest income																		2,381
Interest expense																		(6,691	)
Income before income taxes																	$	187,108
Total assets	$	611,725	$	413,789		$	350,975		$	94,836	$	193,474		$	118,989		$	1,783,788
Equity investments in affiliates		–		19,194			–			3,715		–			–			22,909
Capital expenditures		25,746		10,373			22,973			3,573		884			(2,984	)		60,565
Depreciation and amortization		27,652		9,527			13,542			1,564		5,012			60			57,357
For the year ended December 31, 2009
Net sales	$	858,180	$	346,383		$	208,280		$	99,171	$	217,271		$	–		$	1,729,285
Inter-segment sales		85,630		8,725			4,051			308		7,739			(106,453	)		–
Total	$	943,810	$	355,108		$	212,331		$	99,479	$	225,010		$	(106,453	)	$	1,729,285
EBIT, as adjusted	$	134,544	$	(2,196	)	$	(18,835	)	$	10,648	$	1,009		$	(3,344	)	$	121,826
Special items charge (gain)		10,386		4,335			9,006			528		5,774			–			30,029
EBIT	$	124,158	$	(6,531	)	$	(27,841	)	$	10,120	$	(4,765	)	$	(3,344	)	$	91,797
Interest income																		3,462
Interest expense																		(8,521	)
Income before income taxes																	$	86,738
Total assets	$	606,846	$	359,093		$	310,329		$	81,734	$	181,753		$	165,537		$	1,705,292
Equity investments in affiliates		–		19,455			–			3,444		–			–			22,899
Capital expenditures		13,726		7,543			15,887			796		2,457			(2,208	)		38,201
Depreciation and amortization		30,254		9,779			9,397			1,543		5,485			140			56,598

In 2011, special items include net charges of $188 and $93 for rationalization actions in the Europe Welding and Asia Pacific Welding segments, respectively, primarily related to employee severance and other costs associated with the consolidation of manufacturing operations. The Europe Welding and Asia Pacific Welding segments special items also include a loss of $204 and a gain of $203, respectively, on the sale of assets at rationalized operations.

In 2010, special items include a charge of $1,990 for rationalization actions and $496 in related asset impairment charges for the Europe Welding segment. The Asia Pacific Welding segment includes a gain of $4,555 related to the disposal of assets, a charge of $427 for rationalization actions and $387 in asset impairment charges. The South America Welding segment includes a net charge of $3,123 related to the change in functional currency and devaluation of the Venezuelan currency. The Harris Products Group segment includes a net charge of $871 related to environmental costs associated with the sale of property at a rationalized operation.

In 2009, special items include a charge of $10,386 for rationalization actions for the North America Welding segment. The Europe Welding segment includes a charge of $9,615 for rationalization actions, $253 in related asset impairment charges, $134 in intangible asset impairment charges and a gain of $5,667 on the sale of a property. The Asia Pacific Welding segment includes a charge of $1,692 for rationalization actions, $1,515 in related asset impairment charges, a gain of $2,144 on the settlement of a pension obligation and a loss of $7,943 associated with the acquisition of Jin Tai and related divestiture of Kuang Tai. The South America Welding segment includes a charge of $528 for rationalization actions. The Harris Products Group segment includes a charge of $4,736 for rationalization actions, $293 in related asset impairment charges and $745 in intangible asset impairment charges.

Export sales (excluding intercompany sales) from the United States were $242,380 in 2011, $197,057 in 2010 and $154,526 in 2009. No individual customer comprised more than 10% of the Company's total revenues for any of the three years ended December 31, 2011.

The geographic split of the Company's net sales, based on the location of the customer, and property, plant and equipment were as follows:

	Year Ended December 31,
	2011		2010		2009
Net sales:
United States	$	1,092,838	$	825,371	$	722,638
China		286,121		250,981		156,233
Other foreign countries		1,315,650		993,820		850,414
Total	$	2,694,609	$	2,070,172	$	1,729,285

	December 31,
	2011			2010			2009
Property, plant and equipment, net:
United States	$	149,637		$	149,185		$	153,342
China		96,374			87,722			73,559
Other foreign countries		224,801			242,084			233,514
Eliminations		(361	)		(425	)		(354	)
Total	$	470,451		$	478,566		$	460,061